SME owners aged 18-24 prioritise strategy over convenience

SME owners aged 18-24 twice as likely to prioritise strategy over convenience when setting up their business.

New research from Opus Energy reveals only a minority of SMEs are taking advantage of government driven initiatives such as business zones or industry-driven business clusters, thereby ignoring the possible collaborative opportunities and financial benefits. Furthermore, younger entrepreneurs were found to be the most open to working collaboratively with other businesses, with older entrepreneurs fearful of the competition.

The research shows that young entrepreneurs aged 18-24 were most likely to consider available talent in the local area, along with skill sharing and networking opportunities, when deciding on the location of their business. Older entrepreneurs, in comparison, prioritised convenience and family commitments, while others admitted the location of their business was in fact a fluke.

Overall, just seven per cent of start-up owners are choosing to start their businesses in business zones or clusters, where like-minded companies prosper due to shared benefits such as travel links, low premises cost and available talent. When entrepreneurs under 24 were asked, this more than doubled to 16 per cent.

Of those surveyed, entrepreneurs aged 18-34 were the group most likely to embrace business clusters, recognising that the benefits of working in a cluster include networking opportunities, skilled workers and close proximity to investors and clients. Seventy-seven per cent agreed that working with likeminded businesses in a similar field would help their business, in terms of productivity, commercially and competitively.

This was in stark contrast to just 38 per cent of entrepreneurs aged 35 plus. For those over 45, it dropped to 25 per cent. When asked about their reluctance to work in a business cluster, many cited the risk of their ideas being stolen, high employee turnover and fickle clients.

Nikki Flanders, Opus Energy chief operating officer, comments, ‘Opus Energy started in business clusters, both in Northampton and then in Cardiff, to capitalise on the skills available and the results speak for themselves – it’s helped our business to grow extensively, and we’ve benefited from the high-calibre local talent on offer. There are so many factors which can decide a good or bad location. How we run businesses is changing, so the benefits of clusters can’t be dismissed. Talent, networking opportunities and cost savings are there for the taking, if entrepreneurs are prepared enough to look farther afield.’

For small business owners, investing more time in deciding their location could make a significant difference. Over a quarter (27 per cent) of SME owners knew instantly where they wanted to set up their business, while a further 11 per cent had decided within a day. Almost another fifth (18 per cent) had made the decision within a week.

As well as convenience, the data showed that a reliance on the capital remains a strong factor for entrepreneurs’ choice of start-up location. 2016 saw a record-high for businesses being founded, with 650,000 start-ups established during the year. Of these, 205,325 businesses were set up in London, in comparison to just under 10,000 in Manchester or 8,000 in Leeds. However, the competitiveness of other regions is growing, with start-ups on the increase and business clusters helping to drive this transformation.

Sarah Haywood, CEO, MedCity, a world-leading life sciences cluster, comments, ‘Within the UK life sciences sector, we have some well-developed regional clusters, such as The Golden Triangle of Cambridge, London and Oxford. The region brings together different components of an effective ecosystem including businesses, leading research institutions and universities, investors, hospitals, talent, well developed support and professional service and patients, to create a world-leading region for research, collaboration and innovation.’

Flanders concludes, ‘Setting up a business is not a small undertaking, and there are many important decisions to be made before a company is born. Regional initiatives are available to businesses to help them progress – for example, the government’s Regional Growth Fund or business grants from local councils – so it’s worth investigating a range of locations for your start-up, even if they’re not so convenient.’

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